The Home Depot Announces First Quarter Results; Reaffirms Fiscal Year 2018 Guidance ATLANTA, May 15, 2018 -- The Home Depot, the world's largest home improvement retailer, today reported sales of $24.9 billion for the first quarter of fiscal 2018, a 4.4 percent increase from the first quarter of fiscal 2017. Comparable sales for the first quarter of fiscal 2018 were positive 4.2 percent, and comp sales in the U.S. were positive 3.9 percent. Net earnings for the first quarter of fiscal 2018 were $2.4 billion, or $2.08 per diluted share, compared with net earnings of $2.0 billion, or $1.67 per diluted share, in the same period of fiscal 2017. For the first quarter of fiscal 2018, diluted earnings per share increased 24.6 percent from the same period in the prior year. We are pleased by the strength of our business despite a slow start to the spring selling season, said Craig Menear, chairman, CEO and president. Outside of our seasonal business, we had solid results in all markets and categories and are seeing strong momentum in all lines of business during these first few weeks of May. These trends, as well as a favorable housing and macroeconomic backdrop, give us confidence to reaffirm our sales and earnings guidance for fiscal 2018. I would like to thank our associates for their hard work and continued dedication to our customers. Fiscal 2018 Guidance Including the adoption of discussed below, the Company expects its fiscal 2018 sales to grow by approximately 6.7 percent and comp sales to be up approximately 5.0 percent. The Company also reaffirmed its diluted earnings-per-share growth guidance for the year and expects diluted earnings-per-share growth of approximately 28.0 percent from fiscal 2017 to $9.31. Recent Accounting Pronouncement Revenue Recognition During the first quarter of fiscal 2018, the Company adopted, which pertains to revenue recognition. The adoption of this standard will not materially impact the Company s consolidated financial statements or related disclosures. Under, the Company has changed the presentation of certain expenses and cost reimbursements associated with its private label credit card program, certain expenses related to the sale of gift cards to customers, and gift card breakage income. The Company also has changed its recognition of gift card breakage income to be recognized proportionately as redemption occurs, rather than based on historical redemption patterns. The Company has adopted this standard on a modified retrospective basis. In accordance therewith, financial information prior to fiscal 2018 will not be recast. The consolidated statement of earnings and balance sheet for the first quarter of fiscal 2018 reflect the effect of this accounting policy adoption. The impact of adoption was an increase of $33 million to net sales, a decrease of $98 million to cost of sales, and a corresponding increase of $131 million to operating expenses for the first quarter of fiscal 2018. There is no impact from the Company s adoption on operating income, net earnings or earnings per share. The balance sheet reflects the cumulative impact of adoption using the modified -more-
retrospective method as well as the impact of recording the sales return allowance on a gross basis rather than as a net liability. Additional information about the impact of the adoption of ASU No. 2014-09 is available at http://ir.homedepot.com/financial-reports/quarterly-earnings/2018. - 2 - The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at http://ir.homedepot.com/events-and-presentations. At the end of the first quarter, the Company operated a total of 2,285 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. The Company employs more than 400,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index. ### Certain statements contained herein constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services; net sales growth; comparable sales; effects of competition; implementation of store, interconnected retail, supply chain and technology initiatives; issues related to the payment methods we accept; state of the economy; state of the residential construction, housing and home improvement markets; state of the credit markets, including mortgages, home equity loans and consumer credit; demand for credit offerings; inventory and instock positions; management of relationships with our suppliers and vendors; continuation of share repurchase programs; net earnings performance; earnings per share; dividend targets; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of the Tax Cuts and Jobs Act of 2017; store openings and closures; guidance for fiscal 2018 and beyond; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties many of which are beyond our control or are currently unknown to us as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to those described in Item 1A, Risk Factors, and elsewhere in our Annual Report on Form 10-K for our fiscal year ended January 28, 2018 and in our subsequent Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission. -more-
- 3 - For more information, contact: Financial Community News Media Isabel Janci Stephen Holmes Vice President of Investor Relations Senior Director of Corporate Communications 770-384-2666 770-384-5075 isabel_janci@homedepot.com stephen_holmes@homedepot.com
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS, except per share data Three Months Ended April 29, 2018 April 30, 2017 % Change Net sales $ 24,947 $ 23,887 4.4 % Cost of sales 16,330 15,733 3.8 Gross profit 8,617 8,154 5.7 Operating expenses: Selling, general and administrative 4,779 4,361 9.6 Depreciation and amortization 457 444 2.9 Total operating expenses 5,236 4,805 9.0 Operating income 3,381 3,349 1.0 Interest and other (income) expense: Interest and investment income (22) (13) 69.2 Interest expense 261 254 2.8 Interest and other, net 239 241 (0.8) Earnings before provision for income taxes 3,142 3,108 1.1 Provision for income taxes 738 1,094 (32.5) Net earnings $ 2,404 $ 2,014 19.4 % Basic weighted average common shares 1,152 1,198 (3.8)% Basic earnings per share $ 2.09 $ 1.68 24.4 Diluted weighted average common shares 1,158 1,204 (3.8)% Diluted earnings per share $ 2.08 $ 1.67 24.6 Selected Sales Data (1) Three Months Ended April 29, 2018 April 30, 2017 % Change Customer transactions () 375.9 380.8 (1.3)% Average ticket $ 66.02 $ 62.39 5.8 Sales per square foot 412.03 394.17 4.5 (1) Selected Sales Data does not include results for Interline Brands, Inc., which was acquired in fiscal 2015.
CONDENSED CONSOLIDATED BALANCE SHEETS April 29, 2018 April 30, 2017 January 28, 2018 Assets Cash and cash equivalents $ 3,599 $ 3,565 $ 3,595 Receivables, net 2,296 2,164 1,952 Merchandise inventories 14,432 13,609 12,748 Other current assets 887 558 638 Total current assets 21,214 19,896 18,933 Net property and equipment 21,928 21,789 22,075 Goodwill 2,281 2,095 2,275 Other assets 1,227 1,164 1,246 Total assets $ 46,650 $ 44,944 $ 44,529 Liabilities and Stockholders' Equity Short-term debt $ 350 $ $ 1,559 Accounts payable 9,726 9,138 7,244 Accrued salaries and related expenses 1,413 1,353 1,640 Current installments of long-term debt 1,199 544 1,202 Other current liabilities 5,445 5,403 4,549 Total current liabilities 18,133 16,438 16,194 Long-term debt, excluding current installments 24,244 22,393 24,267 Other liabilities 2,586 2,151 2,614 Total liabilities 44,963 40,982 43,075 Total stockholders equity 1,687 3,962 1,454 Total liabilities and stockholders equity $ 46,650 $ 44,944 $ 44,529
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended April 29, 2018 April 30, 2017 Cash Flows from Operating Activities: Net earnings $ 2,404 $ 2,014 Reconciliation of net earnings to net cash provided by operating activities: Depreciation and amortization 532 505 Stock-based compensation expense 84 81 Changes in working capital and other, net of acquisition effects 961 1,964 Net cash provided by operating activities 3,981 4,564 Cash Flows from Investing Activities: Capital expenditures, net of non-cash capital expenditures (556) (458) Proceeds from sales of property and equipment 8 13 Net cash used in investing activities (548) (445) Cash Flows from Financing Activities: Repayments of short-term debt, net (1,209) (710) Repayments of long-term debt (10) (11) Repurchases of common stock (1,121) (1,289) Proceeds from sales of common stock 14 31 Cash dividends (1,189) (1,069) Other financing activities 115 (33) Net cash used in financing activities (3,400) (3,081) Change in cash and cash equivalents 33 1,038 of exchange rate changes on cash and cash equivalents (29) (11) Cash and cash equivalents at beginning of period 3,595 2,538 Cash and cash equivalents at end of period $ 3,599 $ 3,565
ASU NO. 2014-09 IMPACT OF ADOPTION The Company adopted, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting on the consolidated statement of earnings for the first quarter of fiscal 2018. The implementation of this accounting standard resulted in an increase in net sales, gross profit, selling, general and administrative, and total operating expenses and a decrease in cost of sales. There was no impact on operating income, net earnings, or earnings per share. Three Months Ended April 29, 2018 Impact Excluding Impact Net sales $ 24,947 100.0 % $ 33 $ 24,914 100.0 % Cost of sales 16,330 65.5 (98) 16,428 65.9 Gross profit 8,617 34.5 131 8,486 34.1 Selling, general and administrative 4,779 19.2 131 4,648 18.7 Total operating expenses 5,236 21.0 131 5,105 20.5
ASU NO. 2014-09 IMPACT OF ADOPTION The Company adopted, which pertains to revenue recognition, in the first quarter of fiscal 2018. The following table shows the impact of adopting on the consolidated balance sheet as of April 29, 2018. April 29, 2018 Excluding Assets Receivables, net $ 2,296 $ (46) $ 2,342 Other current assets 887 269 618 Total current assets 21,214 223 20,991 Total assets 46,650 223 46,427 Liabilities and Stockholders' Equity Other current liabilities $ 5,445 $ 124 $ 5,321 Total current liabilities 18,133 124 18,009 Other liabilities 2,586 24 2,562 Total liabilities 44,963 148 44,815 Total stockholders equity 1,687 75 1,612 Total liabilities and stockholders equity 46,650 223 46,427
PRO FORMA EFFECT OF ASU NO. 2014-09 The Company adopted, which pertains to revenue recognition, in the first quarter of fiscal 2018 using the modified retrospective method. In accordance therewith, financial information prior to fiscal 2018 will not be recast as the modified retrospective method does not permit recasting pre-adoption financial information. The following tables present selected as-reported financial results and the pro forma effect of as if the recognition and presentation guidance in the accounting standard had been applied in fiscal 2017. There was no impact on operating income, net earnings, or earnings per share. The fiscal 2017 pro forma financial information included in the tables below is presented for informational purposes only. Three Months Ended April 30, 2017 Including Net sales $ 23,887 100.0 % $ 48 $ 23,935 100.0% Cost of sales 15,733 65.9 (90) 15,643 65.4 Gross profit 8,154 34.1 138 8,292 34.6 Selling, general and administrative 4,361 18.3 138 4,499 18.8 Total operating expenses 4,805 20.1 138 4,943 20.7 Three Months Ended July 30, 2017 Including Net sales $ 28,108 100.0 % $ 33 $ 28,141 100.0% Cost of sales 18,647 66.3 (114) 18,533 65.9 Gross profit 9,461 33.7 147 9,608 34.1 Selling, general and administrative 4,549 16.2 147 4,696 16.7 Total operating expenses 4,998 17.8 147 5,145 18.3 Three Months Ended October 29, 2017 Including Net sales $ 25,026 100.0 % $ 44 $ 25,070 100.0% Cost of sales 16,378 65.4 (85) 16,293 65.0 Gross profit 8,648 34.6 129 8,777 35.0 Selling, general and administrative 4,514 18.0 129 4,643 18.5 Total operating expenses 4,968 19.9 129 5,097 20.3 Three Months Ended January 28, 2018 Including Net sales $ 23,883 100.0 % $ 41 $ 23,924 100.0% Cost of sales 15,790 66.1 (85) 15,705 65.6 Gross profit 8,093 33.9 126 8,219 34.4 Selling, general and administrative 4,440 18.6 126 4,566 19.1 Total operating expenses 4,904 20.5 126 5,030 21.0
Fiscal Year Ended January 28, 2018 Including Net sales $ 100,904 100.0 % $ 166 $ 101,070 100.0% Cost of sales 66,548 66.0 (374) 66,174 65.5 Gross profit 34,356 34.0 540 34,896 34.5 Selling, general and administrative 17,864 17.7 540 18,404 18.2 Total operating expenses 19,675 19.5 540 20,215 20.0